70 ½ vs. 73?

We’ve been hearing some confusion from a lot of clients around the age split of 70 ½ vs. 73 for gifting from an IRA. Which is the correct age? What are the rules around each age?

Historically, the age at which you needed to start taking Required Minimum Distributions (RMD) and the ability to make a gift from your IRA were the same – 70 ½.

As of this past year, the rules have changed somewhat.

Directly from the IRS (which is where we recommend getting your information from): “You cannot keep retirement funds in your account indefinitely. You generally have to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022).”

If you turned 72 before 12/31/2022 – you needed to have already started taking your RMD. If you’re younger than that – you don’t start taking your RMD until you’re 73.

BUT – again according to the IRS: “Each year, an IRA owner age 70 ½ or over can exclude from gross income up to $100,000 of these Qualified Charitable Distributions (QCDs). For a married couple, if both spouses are age 70 ½ or over, and both have IRAs, each spouse can exclude up to $100,000 for a total of up to $200,000 per year.”

The downside, when making a QCD, is that there is no charitable deduction for the gift. If a donor wants a tax deduction, they need to show the IRA distribution as income.

The short of it:

A donor can make gifts up to $100k/$200k per year starting at 70 ½ , but they don’t get the double benefit of counting against their RMD until they’re 73. For many donors, this is still a great option as they can still use their IRA like any other (appreciated) asset and make gifts strategically.

In the end:

This makes marketing donor stories of IRA QCDs at any age critical for you and your organization so your donors understand that:

Other donors like me, make gifts like this.